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Stamp Out the Postal Service

In a speech he delivered on Tuesday at the University of Chicago, presidential aspirant and former Minnesota governor Tim Pawlenty said he would apply a “Google test” to the federal government:

“If you can find a good or service on the Internet, then the federal government probably doesn’t need to be doing it. The post office, the government printing office, Amtrak, Fannie and Freddie were all built for a different time in our country when the private sector did not adequately provide those services. That’s no longer the case.”

Pawlenty is wrong in claiming that the private sector “did not adequately provide” mail delivery, passenger rail, and housing finance in the past, but he is definitely correct when he says that it is well past time for the federal government to extricate itself from commercial activities.

In particular, it is past time for policymakers to consider privatizing the U.S. Postal Service and open mail delivery up to competition.

Contrary to popular myth, the USPS receives virtually no appropriations from the federal government. In the early 1970s, the USPS was made an independent agency of the executive branch and designed to be financially self-sufficient, relying on the sale of postage, mail products, and services for revenue. However, socialist enterprises eventually run into trouble and the USPS is no exception.

The USPS’s revenue base has been irrevocably undermined by the growth in digital communications. Its predominantly unionized workforce is inflexible and excessive labor compensation has led to $66 billion in unfunded obligations. Congressional micromanagement makes sufficient cost-cutting extremely difficult. The USPS has lost over $20 billion since 2006 and is close to maxing out its $15 billion line of credit with the U.S. Treasury.

The response thus far from Congress couldn’t be more typical: a combination of apathy, ignorance, and a desire to avoid making difficult decisions by kicking the can down the road. The following are just two examples.

Congress passed legislation in 2006 requiring the USPS to begin making large annual payments to reduce its unfunded retiree health care obligations. But the country went into a deep recession in 2007, which hurt USPS’s bottom line and made the scheduled payments impractical. However, instead of questioning why postal employees are receiving retiree health care benefits that are offered to an increasingly small number of private sector workers, Congress has already allowed the USPS to skip one payment and is likely to do so again this year. That might solve a short-term problem, but it leaves a larger one for the future.

Then there’s the debate over ending Saturday mail delivery, which USPS management desires for cost-cutting purposes. The characteristic response from policymakers has been to tell the USPS to just “cut costs.” But congressional micromanagement is a major obstacle to the USPS’s ability to sufficiently do so! Moreover, why in the age of email and electronic bill pay does the USPS have to deliver mail six days a week as Congress continues to insist? American consumers should be allowed to choose who delivers their mail, when it’s delivered, and at what price. Unfortunately, such a notion amounts to crazy talk in Congress, where interest in the USPS for many members doesn’t go much further than franking privileges and naming post offices.

That is why presidential leadership is critical for getting Congress to take seriously the idea of freeing the mail from the government’s grip. The federal government has become so massive that members of Congress have little time to devote to big ideas like transforming the USPS. And no member relishes having to deal with the various postal interests who — although they won’t say it — would prefer to simply see a taxpayer bailout.

Those same forces which prevent Congress from thinking outside the box would also place the full force of their weight on an enterprising White House. If Tim Pawlenty is elected, he’s going to have to move beyond the “Google test” and start familiarizing himself with the complexities of postal reform if he’s serious about getting the government out of the mail business.